Fed’s Harker sees 50 bps rate hikes in June, July, then ‘measured’ hikes
2022.05.18 23:31
FILE PHOTO: Shoppers are seen wearing masks while shopping at a Walmart store, in North Brunswick, New Jersey, U.S. July 20, 2020. REUTERS/Eduardo Munoz
(Reuters) – Philadelphia Federal Reserve Bank President Patrick Harker on Wednesday said he expects the U.S. central bank to deliver two more half-point rate hikes before switching to quarter-point increments until the “scourge” of inflation is beaten back.
With inflation at a 40-year high, the Fed has intensified its efforts to curb demand for goods and labor and ultimately ease price pressures by making it more expensive to borrow.
Earlier this month the central bank raised its policy rate by a half percentage point, its first such move in more than two decades, and Fed Chair Jerome Powell said his fellow policymakers broadly backed two more such rates hikes at coming Fed meetings.
“Going forward, if there are no significant changes in the data in the coming weeks, I expect two additional 50 basis point rate hikes in June and July,” Harker said in remarks prepared for delivery to the Mid-Size Bank Coalition of America. “After that, I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”
Under former Fed Chairman Ben Bernanke, the Fed used the term “measured” to refer to a series of quarter-point rate hikes in the mid-2000s.
Chicago Fed chief Charles Evans on Tuesday similarly signaled support for an initial burst of policy tightening and then a shallower rate hike path.
Powell, for his part, has not been as specific about his expectations for the policy path beyond July. On Tuesday he said the Fed will keep pushing on rate hikes until it sees clear and convincing evidence that inflation is cooling.
Fed policymakers say the current bout of high inflation — running at more than three times the Fed’s 2% target — is the product of outsized demand bumping up against constrained supply.
Harker said he expects the U.S. economy to grow 3% this year, enough to keep labor markets tight through the end of the year despite interest rate increases.
